LONDON: Britain’s household incomes are on their longest downward trend on record, as the nation’s cost of living crisis saps the spending power of British households.
Adjusted for inflation, disposable incomes dropped 0.2% in the first three months of the year, the Office for National Statistics (ONS) said.
That’s the fourth straight quarter of decline – the longest run since records began in 1955.
The figures are all the more worrying as they come before April’s tax and energy bill increases kick in, dramatically worsening families’ financial situation.
With inflation forecast to hit double digits later this year, and wages failing to keep up, the prospects for households look increasingly bleak.
In total, incomes are 1.3% lower than a year earlier, the ONS said. The saving ratio, the proportion of income left unspent, was unchanged at 6.8%.
The fall in incomes highlights the strain on consumers struggling to keep up with soaring prices of everything from energy and food to motor fuel and clothing.
That’s pushed inflation to a four-decade high, and Prime Minister Boris Johnson is under mounting pressure to do more to help amid warnings that the economy is sliding into recession.
Gross domestic product (GDP) grew 0.8% in the first quarter, the ONS confirmed. It left output 0.7% above pre-pandemic levels, a better performance than other G7 nations bar the United States and Canada.
However, output has been on a weakening path since January, and the Bank of England now expects a contraction in the second quarter as consumers tighten their belts.
How well the economy holds up will depend on the willingness of people to spend more of their income and draw down an estimated £200bil (RM1.07 trillion) of excess savings built up during the pandemic, when lockdowns restricted opportunities to spend.
If growth is expected to be patchy this year, the outlook for 2023 is for near stagnation, with the The Organisation for Economic Cooperation and Development predicting the UK will perform worse than every Group of 20 economy except sanctions-hit Russia.
Separate figures showed the current-account deficit, the gap between money coming into the UK and money leaving, widened sharply to £51.7bil (RM277bil) in the first quarter. That equated to 8.3% of GDP.
The shift reflected a dramatic widening in the trade shortfall and a £17bil (RM91bil) swing from surplus to deficit in the balance on investment income. — Bloomberg